Strategic Management Report: IAG's Strategic Analysis, Recommendations

This report provides a comprehensive analysis of Insurance Australia Group (IAG), an Australian insurance company with operations in New Zealand and Asia. It examines IAG's mission, vision, past and current strategies, including its differentiation strategy and 'Go to Marketing' approach. The report delves into business practices that faced criticism, such as the spirit bonus and diversity bonus controversies. A detailed PESTLE and SWOT analysis assesses the external and internal environments. The report further explores organizational culture and leadership, concluding with recommendations for improvement. The analysis highlights the importance of quality in IAG's offerings to maximize revenue and sustain its market position. The report aims to provide an in-depth understanding of IAG's strategic management practices and their impact on the company's performance.

Running head: STRATEGIC MANAGEMENT
STRATEGIC MANAGEMENT
Name of the Student
Name of the University
Author Note

1STRATEGIC MANAGEMENT
Executive Summary
The given report throws light on the functioning of IAG. IAG is one of the leading insurance
companies in Australia, with its operations in New Zealand and Asia as well. The company has
been performing well and aims to provide assistance to the different customers who conduct
business with them. The report follows a structured format and helps in the analysis of the
different business processes. Components like the mission vision, past and present strategies
along with the business practices which stirred controversies have been given. Certain
recommendations along with environmental analysis have also been provided. It has been
advised, that the company needs to include quality in its offerings so as to ensure maximum
revenue.

2STRATEGIC MANAGEMENT
Table of Contents
Introduction......................................................................................................................................3
Mission vision, Past and Current strategies.....................................................................................3
Strategies used by the firm..........................................................................................................4
Business practices that faced criticism............................................................................................4
Environmental Analysis...................................................................................................................5
PESTLE.......................................................................................................................................5
SWOT..........................................................................................................................................7
Organizational culture and Leadership............................................................................................7
Conclusion.......................................................................................................................................8
Recommendations............................................................................................................................8
References........................................................................................................................................9

3STRATEGIC MANAGEMENT
Introduction
Strategic Management is a critical domain of business which deals with the different
functions that accompany carries out and tests the viability of each function. IAG is an
Australian company and is used as an acronym for Insurance Australia group. The given
company is based in Australia, with various divisions in New Zealand and Asian countries. The
company offers both corporate and individual insurance services to its customers.
The given report will be discussing the various dimensions of the company and analyze
the motive of the firm (Lasserre, 2017). The first section of the report will be discussing the
mission and vision of the company along with the present and past strategies. The second part of
the report will be discussing the different business practices of the firm which have faced
criticism. The third part of the will be a critical analysis of the business environment and the last
part will be discussing the leadership and structure in the firm.
Mission vision, Past and Current strategies
The IAG s one of the largest Insurance Retailers around the globe and engages in
successful business with different customer types like individuals and businesses alike. The
primary objective of the company is given as follows:
To make the world a safer place.
By this the company means that it aims to make the life of all the stakeholders,
employees and other shareholders safer for their general well being (Iag.com.au., 2018). With its
operations spread out in various countries and a major focus towards Australia and New Zealand,
the company, wants to practice sustainable business practices in order to ensure that they can
gather timely and guaranteed returns for its different stakeholders (Morschett, Schramm-Klein
and Zentes, 2015).Their strategy is to promote the key insurance products while creating growth
opportunities for the different businesses which is engaged in a relationship with.
The company has a simple goal in mind with its Financial Targets well set for the long
term of the company:
 They want a payout of around 75% of the cash earnings
 They want a stable ROE.
 Top shareholder return
Hence, it could be witnessed that the given company has various objectives in mind and
follows the given strategy to ensure it is able to perform well:
Creation of top consumer solutions
In the given aspect, the company aims to create platforms which will go a long way in
fulfilling customer satisfactions and also ensure that the different customer needs are identified
in an advance manner, helps to reach out to the customers in a timely manner, using data to
ensure decision making and other relevant aspects (Hill, Jones and Schilling, 2014).

4STRATEGIC MANAGEMENT
Simplification
The business seeks to bring about simplified and module business models which will be a
los cost operating model. In the given model IAG will aim to reduce the complexity that exists in
an organization, simplify the processes, execute the technological strategy, improve allocation
and maximize the utilization which takes place from the given system.
Agility
The company IAG, seeks to practice agility in its procedures by driving the organization
by speed, innovation and execution skills.
Through the given aspect the company aims to create a disciplined approach towards
management which is only aimed at building stronger role clarity and introduce agile ways of
performing. In the given step, the company also aims to build a talented workforce who clearly
aims to understand the requirements of the customers and provides services to them accordingly
(Iag.com.au., 2018). The company aims to become independent and possess the ability of
assessing the external as well as the internal environment of the business and take decisions
accordingly.
Strategies used by the firm
If the Porter`s strategies are to be taken into consideration then it can be stated that the
company follows a differentiation strategy. The Porter strategies state down three basic generic
strategies that are adopted by the business and tend to ensure the kind of approach a company
aims to follow in the business environment. The different strategies which can be adopted are
strategies which include, differentiation strategy whereby a given company aims to create its
market in the business by offering unique services. The second strategy is the cost leadership
strategy whereby the company aims to create its mark by offering the cheapest product as
available and lastly the focus strategy is adopted. Based on this, the strategy adopted by IAG is
the differentiation strategy. The company aims to offer various goods and services which are not
available amongst its competitors (Iag.com.au., 2018).
Secondly the company also adopts a Go to Marketing strategy. In a Go-to marketing
strategy, the company forms a specific action plan which tends to determine the extent to which
a given company tends to ensure that it is able to revise its operations and reach out to the
customers effectively. Hence, recently in the year 2015, the company has changed its structure
and plans and focused on customer satisfaction.
In the past the company aimed to use a cost leadership strategy but was not as successful
as its competitors and hence a differentiation strategy was adopted by IAG.
Business practices that faced criticism
A business is run by different individuals and this is the reason why there can be certain
instances where the business might face certain problems related to the functioning of the
business enterprise and there may be certain practices which may not be liked by the society or

5STRATEGIC MANAGEMENT
the business critics in general (Vogel and Güttel, 2013). Given below are two issues whereby the
business faced certain problems and issues .
In 2017 the company faced certain level of controversy with respect to the issue of a
spirit bonus of $2.55 million. The various soft executive bonuses which comprise of people and
community bonus suggested by the Common wealth bank has witnessed companies like QBE,
Telstra, Wesfarmers, AMP and Perpetual have simplified their pay structures and combined
various short term and long term incentives together
The company IAG had sanctioned a grant of $2.55 million for the CEO Peter Harmer if
he will be able to reflect IAG Spirit because he was with the company for certain number of
years. The given spirit is based on the behaviour of the employees and executives based on the
firm`s core values which are being closer, braver and faster (Moutinho and Vargas-Sanchez,
2018).However, the investors were not happy about it and they mentioned that although a bonus
was an appreciation, however, one of this large amount was absolutely unnecessary.
The second controversy as faced by the given company was in the year 2016, relating o
the diversity bonus. The diversity bonus is a figure which s generally given out to a head or an
executive of an organization who portrays the best skills and is able to manage diversity easily in
the given organizational realm. Various companies announced the given bonus and gave out a
reasonable amount to the different executives in a firm with respect to the management of
diversity in the given firm (Wheelen, et al., 2017).
IAG was one of those companies which announced the given bonus and the investors
were not pleased about it. The customers and the investors felt that although the diversity
management in the organization was appreciated a large amount of funds need not be paid to the
executives at the expense of the investor`s interest (Hahn, 2013). The CBA and various
organizations had opposed against the passing of the bonus because it was unfair to the different
investors.
Environmental Analysis
PESTLE
The PESTLE analysis is an external environmental tool which goes a long way in
assisting a company to face the external environmental factors which exist in the business.
Through this tool, a firm would easily be able to analyze the effectiveness of the different
business operations.
Political
The political factors have a major role to play in the functioning of the business as the
various policies of the government may have an impact on the long term profitability of the
business. Although the Insurance Australia group is operating in the Insurance sector in more
than 12 countries, it is exposed to the political environment of all the given countries,
collectively. Hence, for the company the given factors may impact the operations. The political
stability of the government and the condition of the insurance sector in the country where it is
present is a major factor that has an impact on the business (Johnson, 2016). The legal

6STRATEGIC MANAGEMENT
framework with respect to contract enforcement, favored trading partners, trust laws in relation
to insurance, pricing regulations and the minimum pricing regulation in relation to insurance.
Other factors include safety regulations with respect to the Insurance sector.
Economic
The macro environmental factors like the savings rate, interest rate, foreign exchange rate
and the economic cycle of the industry are a major determinant of the business operations. The
Insurance Australia Group Limited utilizes a country`s economic factors which comprise of the
inflation, growth and the economic industry special to the given sector lie the growth rate,
spending and forecast related issues (Harrison and John, 2013). The exchange rate, currency
values, infrastructure quality, labor costs , education level and interest rate tend to have an
impact on the business.
Social
The way in which a society functions is a major determinant of the kind of influence it
tends to have on a business operation. The shared beliefs and attitudes of the population
determines the way in which the Insurance Australia Group Limited will understand the
customers in the given market and the way the message will be portrayed to the customers
(Wood, Wrigley and Coe, 2016). The different social factors that tend to have an impact on the
company are as follows:
Demographics of the population, the class structure and educational level of the people in
the given industry, the gender roles, leisure interests of the people, their perspective towards the
savings and others parameters are required to be considered (Jarzabkowsk and Kaplan, 2015).
Technological factors
The technological factors are required to be analyzed to figure out the way in which
technology disrupts the industry. If the rate of change is slow, the economy will be affected in a
slow manner, however, if the rate of change is quite high then, the company will not get much
time to adapt to the given change and might suffer (Grant, 2016). The factors include factors like
Rate of technological diffusion, impact on the value chain , impact on the cost structure among
others.
Environmental
The environmental standards tend to have an impact in the profitability of a firm.
Different companies tend to have different impacts on the operations (Iag.com.au., 2018). These
factors include various factors like the weather, climate change, recycling, air and water
pollution regulations relevant to the given industry, attitudes towards the green products and
attitude towards renewable energy.
Legal
The legal factors are factors like the discrimination law, employment laws, healthy and
safety laws along with data protection and others.

7STRATEGIC MANAGEMENT
SWOT
Organizational culture and Leadership
Recently in 2015, the organizational structure and leadership of the organization has
been changed. The primary purpose of the change in the leadership and organizational structure
has been done to drive and thereby increase the company`s profitability and growth. The
structure came into effect from 9th December, 2015 (NZ Herald., 2018). With effect of the new
leadership structure , the primary objective of the company is now to become a consumer led
and organization which is based on dat. When the company will become this, then it will be able
to quickly adapt to the rapidly changing business environment.
The new structure aims to increase the future profitability prospects by completely
changing the core business of the customers and establishing the three primary functions so that
the insights, products and customer facing divisions are used to create world class solutions.
Their primary purpose is to provide the customers a world leading customer experience (Slack,
2015).
The consumer Division of the company will be focusing on the individuals and families.
They will be given the responsibility of managing and devising new plans for those customers
who can buy the given product or the service. Secondly the Business division will be responsible
for looking after the business company insurances.
They will be focusing on businesses of all sizes (Iag.com.au., 2018). The customer labs
are responsible for managing the customer experience strategy and lead to driving the
organization`s goals and motives. They will also be concentrating on bringing about innovation

8STRATEGIC MANAGEMENT
through the different insights and data, bring about brand architecture across the group so that
they can venture into new business areas.
The digital lab section will concentrate on working on what the IAG Labs already work
on. They will be responsible for looking into the identification of disruptive technology and
accountable for formation of digital applications of the product. They will be given the
responsibilities of managing the core platform of the applications (Hubbard, Rice and Galvin,
2014).The Operations department will be looking after the different functions and claims.
Alongside they will also be looking after the procurement and supply chain management.
The given job was earlier carried out by the Enterprise section. The Asian and New
Zealand businesses will be moved into a new division known as the International division which
will then concentrate on the growing of business in areas like Malaysia, India, Thailand and
Vietnam. They will also engage in maintaining the market presence of New Zealand which is a
considerably good market for the firm.
Conclusion
Therefore, from the given analysis, it could be stated that IAG has been doing well and
learning from the different mistakes t has made in the past in order to ensure that it performs well
and does not repeat the same in future. The company has its operations in various countries and
hence, it needs to ensure that it is being able to abide by the limitations of all the countries. The
given analysis identified the main vision and strategies of the firm followed by the external
environmental analysis. The external environmental analysis identified that the organization has
been doing well but needs to ensure it is following the various rules and regulations of different
economies. Lastly, the organizational structure of the company was analyzed.
Recommendations
From the given analysis, the present environment was analyzed and the given
recommendations have been made:
 Improve service quality: IAG needs to ensure that the service quality that it others to see
to it that the vision and mission of the organization is upheld and the company are able to
perform better than its competitors. It can hire a separate service section to supervise the
services being provided.
 Expand operations- The Company has a good reputation and a brand name. For this
reason, the company needs to ensure, that it is successfully being able to implement and
carry out its plans successfully (Rothaermel, 2015). Through this the company will be
able to cater to a larger market. It has been suggested that the company expands its
operations to other emerging markets like Brazil and Africa to gain crowd.
 Uplift consumer interest-Lastly consumer interest must be updated at all costs and the
company needs to see to it that they do not engage in any activity which may harm the
interest of the customers (Williamson et al., 2013). This also includes looking after its
stakeholders.

9STRATEGIC MANAGEMENT
References
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Hahn, R., 2013. ISO 26000 and the standardization of strategic management processes for
sustainability and corporate social responsibility. Business Strategy and the Environment, 22(7),
pp.442-455.
Harrison, J.S. and John, C.H.S., 2013. Foundations in strategic management. Cengage Learning.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated
approach. Cengage Learning.
Hubbard, G., Rice, J. and Galvin, P., 2014. Strategic management. Pearson Australia.
Iag.com.au. 2018. [online] Available at:
<https://www.iag.com.au/sites/default/files/Documents/Announcements/Dec%208%20-%20IAG
%20announces%20new%20structure%20and%20leadership%20team.pdf> [Accessed 7 May
2018].
Iag.com.au. 2018. Our Spirit | IAG Limited. [online] Available at:
<https://www.iag.com.au/careers/our-spirit> [Accessed 7 May 2018].
Iag.com.au. 2018. Purpose And Strategy | IAG Limited. [online] Available at:
<https://www.iag.com.au/about-us/who-we-are/purpose-and-strategy> [Accessed 7 May 2018].
Jarzabkowski, P. and Kaplan, S., 2015. Strategy tools‐in‐use: A framework for understanding
“technologies of rationality” in practice. Strategic Management Journal, 36(4), pp.537-558.
Johnson, G., 2016. Exploring strategy: text and cases. Pearson Education.
Lasserre, P., 2017. Global strategic management. Palgrave.
Morschett, D., Schramm-Klein, H. and Zentes, J., 2015. Strategic international management (pp.
978-3658078836). Springer.
Moutinho, L. and Vargas-Sanchez, A. eds., 2018. Strategic Management in Tourism, CABI
Tourism Texts. Cabi.

10STRATEGIC MANAGEMENT
NZ Herald. 2018. Upset Over New Zealand Bank Boss' Bonus. [online] Available at:
<https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11721080> [Accessed
7 May 2018].
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
Slack, N., 2015. Operations strategy. John Wiley & Sons, Ltd.
Vogel, R. and Güttel, W.H., 2013. The dynamic capability view in strategic management: A
bibliometric review. International Journal of Management Reviews, 15(4), pp.426-446.
Wheelen, T.L., Hunger, J.D., Hoffman, A.N. and Bamford, C.E., 2017. Strategic management
and business policy. pearson.
Williamson, D., Cooke, P., Jenkins, W. and Moreton, K.M., 2013. Strategic management and
business analysis. Routledge.
Wood, S., Wrigley, N. and Coe, N.M., 2016. Capital discipline and financial market relations in
retail globalization: insights from the case of Tesco plc. Journal of Economic Geography, 17(1),
pp.31-57.